Profit before income tax ,837 1,148,911. Income tax 21 ( 122,084) ( 382,521) Profit for the year 229, ,390

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4 4 Statement of Comprehensive Income Year ended Notes $ 000 $ 000 Interest income: Interest on loans 170, ,931 Interest on deposits with banks 39,875 50,903 Interest on investment securities 451,678 1,381, ,334 1,546,626 Interest expense ( 113,030) ( 146,015) Net interest income ,304 1,400,611 Fees and commissions , ,655 Other operating revenue: Foreign exchange (losses)/gains ( 61,339) 346,520 Gains from securities trading 17,417 2,931 Other revenue 114, ,264 1,114,656 1,972,981 Operating expenses: Staff costs 19 ( 307,725) ( 426,271) Depreciation 8 ( 7,493) ( 10,390) Other ( 447,600) ( 387,409) ( 762,818) ( 824,070) Profit before income tax ,837 1,148,911 Income tax 21 ( 122,084) ( 382,521) Profit for the year 229, ,390 Other comprehensive income: Change in fair value of available-for-sale investments, net of taxation ( 6,244) 33,356 Total comprehensive income 223, ,746 The accompanying notes form an integral part of the financial statements.

5 5 Statement of Changes in Head Office s Equity Year ended Retained Fair Assigned Reserve earnings value Loan loss Unremitted capital fund reserve reserve reserve profits Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 [Note 16(a)][Note 16(b)][Note 16(c)] [Note 16(d)][Note 16(e)] Balances at December 31, , ,609 1,016,252 (16,782) 15, ,748 2,402,048 Comprehensive income for the year: Profit , ,390 Other comprehensive income , ,356 Total comprehensive income for the year , , ,746 Movement between reserves: Transfer to loan loss reserve ,889 ( 9,889) - Balances at December 31, , ,609 1,016,252 16,574 25,501 1,728,249 3,201,794 Comprehensive income for the year: Profit , ,754 Other comprehensive income ( 6,244) - - ( 6,244) Total comprehensive income for the year ( 6,244) - 229, ,510 Movement between reserves: Transfer to retained earnings reserve , ( 512,340) - Transfer to loan loss reserve ,416 ( 11,416) ,340-11,416 ( 523,756) - Balances at 207, ,609 1,528,592 10,330 36,917 1,434,247 3,425,304 The accompanying notes form an integral part of the financial statements.

6 6 Statement of Cash Flows Year ended Notes $ 000 $ 000 Cash flows from operating activities: Profit for the year 229, ,390 Adjustments for: Depreciation 8 7,493 10,390 Interest income ( 662,334) (1,546,626) Interest expense 113, ,015 Income tax charge , ,521 Unrealised foreign exchange loss 9,211 11,148 ( 180,762) ( 230,162) Change in: Loans (1,046,160) ( 600,325) Employee benefit asset/obligation, net ( 230,054) ( 17,778) Other assets 70, ,736 Deposits from customers ( 48,258) 1,371,279 Other liabilities 47,500 1,772 (1,387,077) 1,033,522 Interest received 1,323, ,879 Interest paid ( 140,136) ( 153,595) Income tax paid ( 415,444) ( 315,538) Net cash (used)/provided by operating activities ( 619,500) 1,533,268 Cash flows from investing activities: Investments 4,180,523 ( 62,425) Resale agreements (1,617,290) ( 178,620) Purchase of property, plant and equipment 8 ( 21,924) ( 8,986) Net cash provided/(used) by investing activities 2,541,309 ( 250,031) Cash flows from financing activities: Notes payable ( 40,553) ( 57,044) Repurchase agreements - ( 158,327) Net cash used by financing activities ( 40,553) ( 215,371) Net increase in cash and cash equivalents 1,881,256 1,067,866 Effect of exchange rate fluctuations on cash and cash equivalents ( 22,442) ( 11,148) Cash and cash equivalents at beginning of year 7,238,138 6,181,420 Cash and cash equivalents at end of year 4 9,096,952 7,238,138 The accompanying notes form an integral part of the financial statements.

7 7 Notes to the Financial Statements 1. Identification Citibank, N.A., Jamaica Branch ( the branch ) is domiciled in Jamaica and is a branch of Citibank, N.A. ( Head office ). Its ultimate holding company is Citigroup Inc. Both Citibank, N.A. and its ultimate holding company are incorporated in the United States of America. The branch operates under a licence granted under the Banking Act. The registered office is located at 63 Knutsford Boulevard, Kingston 5. The principal activities of the branch are banking and related financial services. 2. Statement of compliance and basis of preparation (a) Statement of compliance: The financial statements are prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board, and comply with the provisions of the Jamaican Companies Act ( the Act ). New and revised standards and interpretations effective during the year: Certain new and revised standards and interpretations which were in issue came into effect during the current financial year. None of these standards and interpretations had any effect on the branch s financial statements. New and revised standards and interpretations that are not yet effective: At the date of authorisation of the financial statements, certain new standards, and amendments to and interpretations of existing standards, have been issued which are not yet effective and which the branch has not early-adopted. The branch has assessed the relevance of all such new standards, amendments and interpretations with respect to its operations and has determined that the following may be relevant to its operations: IAS 24, Related Party Disclosures (Revised), which is effective for annual reporting periods beginning on or after January 1, 2011, amends the definition of a related party and also expands the list of transactions that require disclosure. The branch is assessing the impact, if any, that the amendment will have on the financial statements.

8 8 2. Statement of compliance and basis of preparation (cont d) (a) Statement of compliance (cont d): New and revised standards and interpretations that are not yet effective (cont d): IFRS 9, Financial Instruments, which is effective for annual reporting periods beginning on or after January 1, 2013, retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The standard includes guidance on classification and measurement of financial liabilities designated as at fair value through profit or loss and incorporates certain existing requirements of IAS 39, Financial Instruments: Recognition and Measurement, on the recognition and de-recognition of financial assets and financial liabilities. The branch will be assessing the impact that the standard will have on its financial statements. Improvements to IFRS (2010) contain amendments to six standards and to one interpretation and are effective for annual reporting periods beginning on or after July 1, 2010 or January 1, The main applicable amendments are as follows: - IFRS 7, Financial Instruments: Disclosures, has been amended, effective for accounting periods beginning on or after January 1, 2011, to add an explicit statement that the interaction between qualitative and quantitative disclosures better enables users to evaluate an entity s exposure to risks arising from financial statements. Existing disclosures relating to maximum exposure to credit risk, financial effect of collateral held as security and other enhancements in respect of a financial instrument have been amended. Certain disclosures relating to the carrying amount of financial assets that are not past due or are not impaired as a result of their terms having been renegotiated and description of collateral held as security for financial assets that are past due have been removed. - IAS 1, Presentation of Financial Statements, which is effective for annual reporting periods beginning on or after January 1, 2011, is amended to state that for each component of equity a reconciliation from opening to closing balances is required to be presented in the statement of changes in equity, showing separately changes arising from items recognised in profit or loss, in other comprehensive income and from transactions with owners acting in their capacity as owners. The branch is assessing the impact, if any, that these amendments may have on the financial statements. (b) Basis of measurement: The financial statements are prepared on the historical cost basis, except for the inclusion of available-for-sale investments at fair value.

9 9 2. Statement of compliance and basis of preparation (cont d) (c) Functional and presentation currency: The financial statements are presented in Jamaica dollars, which is the functional currency of the branch, rounded to the nearest thousand. (d) Accounting estimates and judgements: The preparation of the financial statements in conformity with IFRS and the Act requires management to make judgments, estimates and assumptions that affect the reported amounts of, and disclosures relating to assets, liabilities, contingent assets and contingent liabilities at the reporting date and the income and expenses for the year then ended. Actual amounts could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant assumptions about the future and key areas of estimation uncertainty and the critical judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements, and have a significant risk of material adjustment in the next financial year, are as follows: (i) Key sources of estimation uncertainty Pension and other post-employment benefits: The amounts recognised in the statement of financial position and statement of comprehensive income for pension and other post-employment benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised in the financial statements include expected long-term return on plan assets, the discount rate used to determine the present value of estimated future cash flows required to settle the pension and other post-employment obligations and the expected rate of increase in medical costs for post-retirement medical benefits. The expected return on plan assets assumed considers the long-term historical returns, asset allocation and future estimates of long-term investment returns. The discount rate is determined based on the estimate of yield on long-term government securities that have maturity dates approximating the terms of the branch s obligation; in the absence of such instruments in Jamaica, it has been necessary to estimate the rate by extrapolating from the longest-tenor security on the market. The estimate of expected rate of increase in medical costs is based on inflationary factors. Any changes in these assumptions will impact the amounts recorded in the financial statements for these obligations.

10 10 2. Statement of compliance and basis of preparation (cont d) (d) Accounting estimates and judgements (cont d): (i) Key sources of estimation uncertainty (cont d) Allowance for loan losses: Allowance for loan losses represents management s estimate of losses inherent in the portfolio. Credit losses are deducted from the allowance and subsequent recoveries are added. In determining amounts recorded for impairment of loan losses in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measurable decrease in the estimated future cash flows from loans, for example, due to repayment default or adverse economic conditions. Management also makes estimates of the likely estimated future cash flows from impaired loans as well as the timing of such cash flows. Historical loss experience is applied where indicators of impairment are not observable on individually significant loans and loan portfolios with similar characteristics, such as credit risks. Useful life and residual value of property, plant and equipment: The residual value and useful life of property, plant and equipment are reviewed at the reporting date, and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimates. The useful life of an asset is defined in terms of the assets expected utility to the branch. Fair value of financial instruments: In the absence of quoted market prices, the fair value of a significant portion of the branch s financial instruments was determined using a generally accepted alternative to quoted market prices. Considerable judgement is required in interpreting market data to arrive at estimates of fair value or in selecting inputs for price estimation models, particularly since pricing inputs include data not observed in actual market transactions but indicative information. Consequently, the estimates arrived at may be significantly different from the actual price of the instrument in an arm s length transaction. Contingent liabilities: The branch is the defendant and plaintiff in lawsuits, which are being handled by the branch s attorneys. The attorneys handling the cases for the branch have given their opinion on the likely outcome of these cases, based on, inter alia, established case law. Where the attorneys have indicated that the outcome of cases is likely to be in the branch s favour, or where amounts to be awarded are uncertain, no provision has been included in the financial statements.

11 11 2. Statement of compliance and basis of preparation (cont d) (d) Accounting estimates and judgements (cont d): (ii) Critical accounting judgements made in applying the branch s accounting policies: The branch s accounting policies provide scope for assets and liabilities to be designated at inception into different accounting categories in certain circumstances. In classifying investment securities as loans and receivables, the branch has determined that it has met the criteria for this designation as set out in accounting policy note 3(c). 3. Significant accounting policies (a) Financial assets and liabilities: A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. (i) Recognition: The branch initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date that they are originated. All other financial assets and liabilities are initially recognised on the trade date, i.e., the date at which the branch becomes a party to the contractual provisions of the instrument. (ii) Derecognition: The branch derecognises a financial instrument when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the branch is recognised as a separate asset or liability on the statement of financial position. The branch enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised from the statement of financial position. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions. The branch derecognises a financial liability when its contractual obligations expire or are discharged or cancelled. (iii) Offsetting: Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the branch has a legal right to set off the recognised amounts and it intends to settle on a net basis or to realise the assets and settle the liability simultaneously.

12 12 3. Significant accounting policies (cont'd) (a) Financial assets and liabilities (cont d): (iv) (v) Amortised cost: Amortised cost is calculated using the effective interest method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument. Fair value measurement principles: Fair value is the arm s length consideration for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market price, if one exists. Determination of fair value: A financial asset or liability is measured initially at fair value. The best evidence of fair value at initial recognition is the transaction price, unless the fair value of that instrument is evidenced by comparison with other observable current market transaction in the same instrument or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss, or other comprehensive income for changes in the fair value of available-for-sale assets. When the available-for-sale assets are impaired, sold, collected or otherwise disposed of, the cumulative gain or loss recognised in other comprehensive income is included in profit or loss. The fair values of cash and cash equivalents, resale agreements, cheques and other items in transit, other assets, customers liabilities under acceptances, due to other banks and financial institutions, repurchase agreements and other liabilities are considered to approximate their carrying values. The fair values of available-for-sale securities are the amounts at which these securities are carried (see note 7) in accordance with policy note 3 (e). These values are based on quoted prices in an active market, where available, or determined by a suitable alternative method. A market is regarded as active if quoted prices are readily and regularly available from an exchange dealer, broker or other agency and represent actual and regularly occurring market transactions on an arm s length basis. In the absence of an active market, other valuation techniques are used. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the branch and is consistent with accepted economic methodologies for pricing financial instruments.

13 13 3. Significant accounting policies (cont'd) (a) (b) Financial assets and liabilities (cont d): (v) (vi) Fair value measurement principles (cont d) Determination of fair value (cont d): Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. Any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured, is stated at cost, including transaction costs, less impairment losses. Where discounted cash flow techniques are used, estimated future cash flows are based on management s best estimates and the discount rate is a market related rate at the reporting date for an instrument with similar terms and conditions. The estimated fair value of loans is assumed to be the principal receivable less any provision for losses, as these financial assets are generally repriced when market interest rates change. The fair values of deposits and notes payable are considered to approximate their carrying values, as they bear rates which approximate market rates prevailing at the reporting date. Cash and cash equivalents: Cash and cash equivalents comprise cash on hand, cash deposited with the central bank and other short-term deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value. These are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. (vii) Other assets: Other assets are stated at amortised cost less impairment losses. (viii) Other liabilities: Other liabilities are stated at amortised cost. Resale and repurchase agreements: Transactions involving purchases of securities under resale agreements ( resale agreements or reverse repos ) or sales of securities under repurchase agreements ( repurchase agreements or repos ) are accounted for as short-term collateralised lending and borrowing, respectively. Accordingly, securities sold under repurchase agreements remain on the statement of financial position and are measured in accordance with their original measurement principles. The proceeds of sale are reported as liabilities and are carried at amortised cost. Securities purchased under resale agreements are reported not as purchases of the securities, but as receivables and are carried in the statement of financial position at amortised cost. It is the policy of the branch to obtain possession of collateral with a market value in excess of the principal amount loaned under resale agreements.

14 14 3. Significant accounting policies (cont'd) (b) Resale and repurchase agreements (cont d): The difference between the amount borrowed or invested and the amount repaid or collected is recognised as interest expense or interest income, respectively, in the statement of comprehensive income over the life of each agreement using the effective interest method. (c) Loans and advances: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those which the branch classifies as held-for-trading, and those that the branch designates as at fair value through profit or loss or those that, on initial recognition, are designated as available-for-sale. Loans are identified as impaired and placed on a cash (non-accrual) basis when it is determined that the payment of interest or principal is doubtful, or when interest or principal is 90 days past due, except when the loan is adequately collateralised and in the process of collection. Any interest accrued on impaired corporate loans is reversed at 90 days and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is a doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. Impaired corporate loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans, where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment, are written down to the lower of cost or collateral value. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms. (d) Financial guarantees: Financial guarantees are contracts that require the branch to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. Financial guarantees are included in other liabilities. Substantially all the risks and rewards of ownership of the collateral are transferred to the branch during the life of the financial guarantee. Under guarantee transactions the branch obtains collateral to cover the total of the liability. These are recognised at fair value, as a financial asset, equal to the amount of the financial guarantee liability. Financial guarantees are derecognised when they expire and the terms of contract are fulfilled.

15 15 3. Significant accounting policies (cont'd) (e) Investment securities: Securities acquired or loans granted or other receivables that have a fixed or determinable payment and which are not quoted in an active market are classified as loans and receivables. All other investments are classified as available-for-sale instruments. Loans and receivables are initially measured at cost and subsequently at amortised cost, less impairment losses. Available-for-sale investments are non-derivative assets that are measured initially at cost and subsequently at fair value with changes in fair value recognised in other comprehensive income, except for impairment losses and, in the case of debt securities, foreign exchange gains and losses. Where fair value cannot be reliably measured, they are stated at cost. Where the securities are disposed of, or impaired, the related accumulated unrealised gains or losses are recognised in profit or loss. Investments are recognised/derecognised on the day they are transferred to/from the branch. (f) Property, plant and equipment: (i) Property, plant and equipment: Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self constructed assets includes the cost of material and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. (ii) Subsequent costs: The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part flow to the branch and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss. (iii) Depreciation: Depreciation is recognised in profit or loss on the straight-line basis at rates estimated to write-down the relevant assets, over their expected useful lives, to their residual values. Depreciation rates are as follows: Motor vehicles 20% Computers 33⅓% Installation, furniture & equipment 10 and 20% The depreciation methods, useful lives and residual values are reassessed at the reporting date and adjusted if appropriate.

16 16 3. Significant accounting policies (cont'd) (g) Interest income and expense: Interest income and expense are recognised in profit or loss on the accrual basis using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the branch estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. The calculation of the effective interest rate includes all fees paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability. Interest income and expense are recognised in profit or loss on the accrual basis using the effective interest method, except that where collection of interest income is considered doubtful or payment is outstanding for 90 days or more, the cash basis is used. Accrued interest on loans which are in arrears for 90 days and over is excluded from income in accordance with the Banking Act. IFRS requires that when collection of loans becomes doubtful, such loans are to be written down to their recoverable amounts after which interest income is to be recognised based on the rate of interest that was used to discount the future cash flows in arriving at the recoverable amount. The difference between the interest recognised under the Banking Act and that recognised under IFRS has been assessed as immaterial. (h) Fees and commission: Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. When a loan commitment is expected to result in the drawn-down of a loan, loan commitment fees are recognised on the straight-line basis over the commitment period. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

17 17 3. Significant accounting policies (cont'd) (i) Provision for probable credit losses: The allowance to cover specific losses on the credit portfolio is maintained at a level considered adequate to provide for potential loan losses and is based on management's evaluation of individual loans in the credit portfolio. The evaluation takes all relevant matters into consideration, including prevailing and anticipated business and economic conditions, the collateral held, the debtor s ability to repay the loan and the requirements of section 17 of the Banking Act, which requires that appropriate provision be made for all loans on which interest payments and principal repayments are ninety or more days in arrears. Amounts are written off from the provision whenever management has concluded that such amounts may not be recovered. General provisions are made on the credit portfolio at ½% on mortgage loans and 1% on other credits as established by the Bank of Jamaica. IFRS permits only specific loan loss provisions and requires that the expected future cash flows of impaired loans be discounted and the increase in the present value be reported as interest income. The loan loss provision required under the Banking Act that is in excess of the requirements of IFRS is treated as an appropriation of unremitted profits and included in a non-distributable loan loss reserve [note 16(e)]. (j) Foreign currency: Transactions in foreign currencies are translated into the functional currency of the branch at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the spot exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the spot exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. (k) Employee benefits: Employee benefits are all forms of consideration given by the branch in exchange for service rendered by employees. These include current or short-term benefits such as salaries, bonuses, NIS contributions, annual vacation leave, and non-monetary benefits such as medical care and housing; post-employment benefits such as pensions; and other long-term employee benefits such as termination benefits.

18 18 3. Significant accounting policies (cont'd) (k) Employee benefits (cont d): Employee benefits that are earned as a result of past or current service are recognised in the following manner: Short-term employee benefits are recognised as a liability, net of payments made, and charged as expense. The expected cost of vacation leave that accumulates is recognised when the employee becomes entitled to the leave. Postemployment benefits are accounted for as described below. Post employment benefits comprise pensions and health care. The expenses and the related assets and obligations included in these financial statements have been actuarially determined by a qualified independent actuary, appointed by management. The appointed actuary s report outlines the scope of the valuation and the actuary s opinion. The actuarial valuations were conducted in accordance with IAS 19, and the financial statements reflect the branch s post-employment benefit asset and obligations as computed by the actuary. In carrying out their audit, the auditors relied on the actuary s report. (i) Defined benefit pension plan The branch s net obligation under its defined-benefit pension plan is calculated by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods; that value is discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is determined by reference to the yield at the reporting date on long-term government securities with maturities approximating the terms of the branch s obligation. The calculation is performed by a qualified actuary using the projected unit credit method. When the benefits of the plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are vested immediately, the expense is recognised immediately in profit or loss. To the extent that any cumulative unrecognised gain or loss exceeds ten (10) percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in the statement of comprehensive income over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised. Where the calculation results in a benefit to the branch, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

19 19 3. Significant accounting policies (cont'd) (k) Employee benefits (cont d): (ii) Health care The branch s obligation in respect of unfunded long-term employee health care benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The discount rate is determined as per the defined benefit pension plan set out above. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognised in profit or loss in the period in which they arise. (iii) Employee equity compensation plans The Head Office has certain equity compensation plans under which it administers stock options, stock awards and stock purchase programs and in which the branch participates. Under the stock award program, a specified portion of a participant s incentive compensation is made in the form of a restricted or deferred stock award. Vesting periods for restricted and deferred stock awards generally range from 3 to 5 years. The cost of providing stock awards is charged in profit or loss as the awards become vested. The amounts involved are not considered material. All stock options are granted on Citigroup s common stock with exercise prices equal to the fair market value at the time of the grant. Options have varying terms depending on the year they were granted. The cost of the employee s exercise of the options is borne by Citigroup. (l) Related parties: A party is related to the branch if: (i) directly or indirectly, the party: (1) controls, is controlled by, or is under common control with the branch; (2) has an interest in the branch that gives it significant influence over the branch, or (3) has joint control over the branch; (ii) the party is an associate of the branch; (iii) the party is a joint venture in which the branch is a venturer (iv) the party is a member of the key management personnel of the branch;

20 20 3. Significant accounting policies (cont'd) (l) Related parties (cont d): A party is related to the branch if (cont d): (v) the party is a close member of the family of any individual referred to in (i) or (iv) above; (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (i) or (iv); or (vii) the party is a post-employment benefit plan for the benefit of employees of the branch, or any entity that is a related party of the branch. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Transactions and balances with related parties are disclosed in note 22. (m) Income tax expense: Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss, except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income. (i) Current income tax Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. (ii) Deferred income tax: Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on laws that have been enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be realised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

21 21 3. Significant accounting policies (cont'd) (m) Income tax expense (cont d): (ii) Deferred income tax (cont d): Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets, and they relate to income taxes levied by the same tax authority and intend to settle on a net basis or the tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (n) Impairment: The carrying amounts of the branch s assets, other than loans [see note 2(d)(i)], are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such evidence exists, the asset s recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. (i) Calculation of recoverable amount: The recoverable amount of loans receivable is determined as indicated in accounting policy 3(c). The recoverable amount of the branch s investment securities and other assets is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversals of impairment: An impairment loss in respect of a loan or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of an equity instrument classified as available-for-sale is not reversed through profit or loss if the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in profit or loss.

22 22 3. Significant accounting policies (cont'd) (n) Impairment (cont d): (ii) Reversals of impairment (cont d): In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 4. Cash and cash equivalents $ 000 $ 000 Notes and coins, money at call, and deposits and cash reserves at Bank of Jamaica 1,546,524 1,712,138 Due from fellow subsidiary 5,789 34,718 Accounts with head office 6,903,228 39,522 Accounts with other branches 42,885 5,142,458 Cheques and other items in transit 233, ,268 Accounts with other financial institutions 365, ,034 9,096,952 7,238,138 Of the total deposits held with the Bank of Jamaica, $1,083,603,426 (2009: $1,421,428,767) is held in compliance with section 14(1) of the Banking Act, which requires that every licensee maintains a cash reserve, in the form of a deposit with Bank of Jamaica, of a specified percentage of its deposit liabilities. No portion of the cash reserves is available for investment or other use by the branch. The specified percentage in force at the end of the year for Jamaican currency was 12% (2009: 14%) and for foreign currency 9% (2009:11%). 5. Resale agreements At the reporting date, the fair value of the underlying securities held for resale agreements was $1,809,215,009 (2009: $197,843,189).

23 23 6. Loans, less allowance for impairment (a) Loans, net of allowance for impairment, are due, from the reporting date as follows: $ 000 $ 000 Within 3 months 986, ,884 3 months -12 months 6,490 2, years 1,053, ,535 5 years & over 32,192 20,378 2,078,567 1,035,193 The branch s four most significant customers (in the manufacturing and distribution sectors) accounts for $1,756,600,000 representing 84.51% of total loans. (b) Impairment losses The aging of loans, net of allowance for impairment losses, is as follows: $ 000 $ 000 Allowance Allowance for for Gross impairment Gross impairment Not past due and not impaired 1,972,590-1,035,193 - Past due and not impaired 105, ,078,567-1,035,193 - The portion of the provision for credit losses in excess of that required by IAS 39 is determined under Bank of Jamaica regulatory requirements and reflected as a nondistributable loan loss reserve in equity, as follows: $ 000 $ 000 At beginning of year 25,501 15,612 Recognised during the year 11,416 9,889 At end of year 36,917 25,501 Provision made in accordance with IAS Additional provision made in accordance with regulatory requirements 36,917 25,501 36,917 25,501

24 24 6. Loans, less provision for probable losses (cont d) (c) The maximum exposure to credit risk for loans is the amount in the statement of financial position. Loans are concentrated by industry sector as follows: Number of loans $ 000 $ 000 Financial institutions - 2-1,388 Professional and other services ,387 14,017 Individuals ,270 83,706 Manufacturing 9 6 1,051, ,044 Distribution , ,205 Public sector ,556 15, ,078,567 1,035,193 (d) (e) At the reporting date, loans receivable on which interest is no longer being accrued amounted to $105,977,000 (2009: $Nil). At the reporting date renegotiated loans amounted to $Nil (2009: $126,397,000). No impairment loss was recognised. 7. Investment securities $ 000 $ 000 Available for sale securities: Securities issued or guaranteed by Government of Jamaica: Debentures 395,866 1,540,764 Bonds (denominated in United States dollars) 340, ,307 Investment bond 643,801 1,042,386 Certificates of deposit 600,056 3,236,101 1,979,949 6,167,558 Unquoted equities: Interest in Automated Payments Limited [see (a) below] 5,020 5,020 1,984,969 6,172,578 (a) This represents a 14.29% (2009: 14.29%) holding by the branch in Automated Payments Limited, a company established and co-owned by commercial banks to provide automated clearing facilities to the commercial banking system.

25 25 8. Property, plant and equipment Computers Motor and Work-in- Furniture & vehicles installation progress equipment Total $ 000 $ 000 $ 000 $ 000 $ 000 Cost: December 31, ,130 21,868 10,502 90, ,918 Additions - - 6,165 2,821 8,986 December 31, ,130 21,868 16,667 93, ,904 Additions ,488 7,436 21,924 6,130 21,868 31, , ,828 Depreciation: December 31, ,941 17,172-77,545 96,658 Charge for year 1,226 1,008-8,156 10,390 December 31, ,167 18,180-85, ,048 Charge for year 1, ,296 7,493 4,393 19,151-90, ,541 Net book values: 1,737 2,717 31,155 9,678 45, Other assets December 31, ,963 3,688 16,667 7,538 30,856 December 31, ,189 4,696 10,502 12,873 32,260 $ 000 $ 000 Interest receivable 25, ,116 Prepayments and items in course of clearing items 13,520 11,402 Foreign currency contracts - 56,520 Other 37,851 54,202 76, ,240

26 Employee benefits The branch operates a defined benefit pension plan [see note 3(k)] which is open to all permanent employees and is managed by Scotia DBG Investments Limited. The pension plan is funded by employee contributions at rates varying between 4% and 10% of salary, and employer contributions at rates recommended by independent actuaries from time to time. Pension benefits are based on average salary for the last three years of pensionable service. The branch also operates an insured health plan covering employees and pensioners. The employer contributes 80% of the premium for the pensioners and 80% for employees. (a) Employee benefit asset/(obligation): Pension asset Health care obligation $ 000 $ 000 $ 000 $ 000 Present value of obligations ( 415,224) ( 249,387) (82,844) (30,965) Fair value of plan assets 1,274,415 1,131, Asset not recognised ( 409,514) ( 558,244) - - Unrecognised actuarial (gains)/losses ( 120,988) ( 231,169) 47,324 1,234 Net asset/(obligation) at end of year 328,689 92,846 (35,520) (29,731) (b) Movements in the net asset/(obligation) recognised in the statement of financial position: Pension asset Health care obligation $ 000 $ 000 $ 000 $ 000 Net asset/(obligation) at January 1 92,846 70,002 (29,731) (24,665) Contributions Credit/(expense) recognised in statement of comprehensive income 235,757 22,762 ( 6,623) ( 5,778) Net asset/(obligation) at December ,689 92,846 (35,520) (29,731) (c) (i) Movements in the present value of obligations: Pension asset Health care obligation $'000 $'000 $'000 $'000 Balance at Janauary 1 249, ,950 (30,965) (24,339) Benefits paid ( 13,584) ( 12,515) 1, Service and interest costs 56,962 45,014 ( 7,301) ( 5,796) Actuarial gain 122,459 34,938 (45,736) ( 1,542) Balance at December , ,387 (82,844) (30,965)

27 Employee benefits (cont d) (c) (ii) Movements in fair value of pension plan assets: $'000 $'000 Fair value of plan assets at January 1 1,131, ,760 Contributions paid 13,599 12,565 Expected return on plan assets 123, ,247 Benefits paid (13,584) ( 12,515) Actuarial gain 19,630 77,589 Fair value of plan assets on December 31 1,274,415 1,131,646 (iii) Plan assets consist of the following: Equities 245, ,862 Fixed income securities 1,029, ,784 1,274,415 1,131,646 (d) (Credit)/expense recognised in statement of comprehensive income: Pension asset Health care obligation $ 000 $ 000 $ 000 $ 000 Current service costs 2,500 2,410 2,152 1,732 Interest on obligation 40,949 30,120 5,150 4,064 Actuarial gains recognised ( 4,424) ( 3,250) ( 7) ( 18) Income not eligible for recognition due to limitation (150,435) 51, Expected return on plan assets (124,347) (103,247) - - Expense/(credit) recognised in profit (note 19) (235,757) ( 22,762) 7,295 5,778 Actual return on plan assets 11.30% 17.06% (e) Principal actuarial assumptions at the reporting date (expressed as weighted averages) Pension plan Health benefit obligation % % % % Discount rate Expected return on plan assets at December Future salary increases Future pension increases Future health cost increases